GBP/USD fell again on Wednesday as the IMF warned the UK government they should reconsider their economic plans, suggesting it is ill-timed.
GBP/USD traded as low as 1.0630 overnight as sterling resumed declines.
The new UK government has been warned by the IMF their first fiscal package risks creating inequality in the UK and was not recommended in the current climate.
Here’s the full, critical IMF statement released tonight about the UK. “We do not recommend” big fiscal moves. Nov23 Budget a chance to “reevaluate” (ie change) the big tax cuts just announced. Yikes. pic.twitter.com/w2UF4UvY7W
— Ben Riley-Smith (@benrileysmith) September 27, 2022
Such comments from the IMF will be deeply embarrassing for Liz Truss after UK assets were pummelled in the wake of Friday’s mini budget.
The immediate market reaction was to dump Sterling and UK bonds, raising the prospect of higher inflation and borrowing costs for households. Some mortgage providers have withdrawn their products as a result.
Data compiled by Bloomberg showed UK mortgage rates could hit 6% next year. After a decade of near zero rates, such a sharp increase in mortgage rates is set to rock the housing market.
The impact will be felt the most by lower income households and will be the driver of the increased inequality the IMF points to in their highly critical statement.
This will be exacerbated by tax cuts that favoured higher earners.
Truss and Kwarteng should be left feeling humiliated by the IMFs suggestion to use November’s budget to reconsider their plans.
